Profit Margin & Markup Calculator
Work out your profit margin and markup from any two numbers you know: cost and price, cost and margin, cost and markup, or price and margin. Built for owners who price jobs and products and want the real figures, with the formulas shown.
How to use this tool
- Pick what you knowChoose the pair of numbers you already have. The fields change to match.
- Enter the numbersUse the price before sales tax. Add operating expenses if you want a net margin as well.
- Read the resultGross profit, margin and markup update as you type, with the formulas below them.
Margin vs markup, side by side
People mix these two up constantly, and it costs real money. Both measure the same profit. They only differ in what you divide by.
- Profit = price − cost
- Margin = (price − cost) ÷ price × 100
- Markup = (price − cost) ÷ cost × 100
- Price from cost and margin = cost ÷ (1 − margin)
- Price from cost and markup = cost × (1 + markup)
- Margin to markup = margin ÷ (1 − margin) · Markup to margin = markup ÷ (1 + markup)
Why 50% markup is only a 33.3% margin
Say a part costs you $100 and you add a 50% markup. The price is $150 and your profit is $50. Now ask the two questions. Markup: how big is the $50 compared with what I paid? It is half of $100, so 50%. Margin: how much of what the customer handed me is mine to keep? $50 out of $150, which is one third, so 33.3%.
The markup base ($100) is smaller than the margin base ($150), so for the same dollars markup is always the bigger number. The gap widens quickly: a 100% markup (you double your cost) is only a 50% margin, and a 300% markup is a 75% margin.
Margin to markup conversion table
Read across: to earn the margin on the left, your markup on cost has to be the figure in the middle.
| Margin | Markup needed | Price on a $100 cost |
|---|---|---|
| 10% | 11.1% | $111.11 |
| 15% | 17.6% | $117.65 |
| 20% | 25% | $125.00 |
| 25% | 33.3% | $133.33 |
| 30% | 42.9% | $142.86 |
| 35% | 53.8% | $153.85 |
| 40% | 66.7% | $166.67 |
| 45% | 81.8% | $181.82 |
| 50% | 100% | $200.00 |
| 55% | 122.2% | $222.22 |
| 60% | 150% | $250.00 |
Worked examples
1. Pricing a job to hit a margin
A job costs $640 in materials and labor and you want a 35% margin. Divide by (1 − 0.35): $640 ÷ 0.65 = $984.62, a profit of $344.62. The markup that produces it is 53.8%. If you had just added 35% to the cost you would charge $864.00, and your real margin would be 25.9%, about $120.62 short on this one job.
2. What a discount does to profit
An item costs $100 and sells for $150: $50.00 profit, a 33.3% margin. A 20% discount takes the price to $120.00. The discount is only $30, but your profit falls from $50 to $20.00, a 60% drop, and the margin to 16.7%. Discounts come straight out of profit, not out of the cost.
3. Gross margin vs net margin
You bill $10,000 for work that cost $6,000 to deliver. Gross profit is $4,000, a 40% gross margin. If $2,500 of rent, insurance, software and office time belongs to that work, net profit is $1,500.00 and the net margin is 15%. Quoting a price off the gross margin alone is how businesses stay busy and still lose money.
Common mistakes and pitfalls
- Treating markup as margin. A 30% markup is a 23.1% margin. If your plan needs 30% margin, the markup has to be 42.9%.
- Adding the margin to the cost. Price from a margin is cost ÷ (1 − margin), never cost × (1 + margin).
- Leaving costs out. Count labor hours, subcontractors, delivery, waste, warranty callbacks and payment processing fees. A margin built on a partial cost is flattering and wrong.
- Including sales tax in the price. Tax you collect for the state is not your revenue. Enter the price before tax.
- Forgetting discounts, refunds and write-offs. Use the price you actually receive, not the list price.
- Comparing margins across different businesses. A reseller and a service company have very different cost structures, so one is not "better" because its percentage is higher. Compare with your own history and your own trade.
- Mixing gross and net. Gross margin does not pay rent. Make sure your overhead is covered by the gross profit you price in.
- Percent change vs percentage points. Moving from a 20% to a 25% margin is a 5 percentage point gain, but a 25% increase in profit per dollar of sales.